Friday, March 6, 2009

Obama's Radicalism Is Killing the Dow (from the Wall Street Journal)

It's hard not to see the continued sell-off on Wall Street and the growing fear on Main Street as a product, at least in part, of the realization that our new president's policies are designed to radically re-engineer the market-based U.S. economy, not just mitigate the recession and financial crisis.

The illusion that Barack Obama will lead from the economic center has quickly come to an end. Instead of combining the best policies of past Democratic presidents -- John Kennedy on taxes, Bill Clinton on welfare reform and a balanced budget, for instance -- President Obama is returning to Jimmy Carter's higher taxes and Mr. Clinton's draconian defense drawdown.

Mr. Obama's $3.6 trillion budget blueprint, by his own admission, redefines the role of government in our economy and society. The budget more than doubles the national debt held by the public, adding more to the debt than all previous presidents -- from George Washington to George W. Bush -- combined. It reduces defense spending to a level not sustained since the dangerous days before World War II, while increasing nondefense spending (relative to GDP) to the highest level in U.S. history. And it would raise taxes to historically high levels (again, relative to GDP). And all of this before addressing the impending explosion in Social Security and Medicare costs.

To be fair, specific parts of the president's budget are admirable and deserve support: increased means-testing in agriculture and medical payments; permanent indexing of the alternative minimum tax and other tax reductions; recognizing the need for further financial rescue and likely losses thereon; and bringing spending into the budget that was previously in supplemental appropriations, such as funding for the wars in Iraq and Afghanistan.

The specific problems, however, far outweigh the positives. First are the quite optimistic forecasts, despite the higher taxes and government micromanagement that will harm the economy. The budget projects a much shallower recession and stronger recovery than private forecasters or the nonpartisan Congressional Budget Office are projecting. It implies a vast amount of additional spending and higher taxes, above and beyond even these record levels. For example, it calls for a down payment on universal health care, with the additional "resources" needed "TBD" (to be determined).

Mr. Obama has bravely said he will deal with the projected deficits in Medicare and Social Security. While reform of these programs is vital, the president has shown little interest in reining in the growth of real spending per beneficiary, and he has rejected increasing the retirement age. Instead, he's proposed additional taxes on earnings above the current payroll tax cap of $106,800 -- a bad policy that would raise marginal tax rates still further and barely dent the long-run deficit.

Increasing the top tax rates on earnings to 39.6% and on capital gains and dividends to 20% will reduce incentives for our most productive citizens and small businesses to work, save and invest -- with effective rates higher still because of restrictions on itemized deductions and raising the Social Security cap. As every economics student learns, high marginal rates distort economic decisions, the damage from which rises with the square of the rates (doubling the rates quadruples the harm). The president claims he is only hitting 2% of the population, but many more will at some point be in these brackets.

As for energy policy, the president's cap-and-trade plan for CO2 would ensnare a vast network of covered sources, opening up countless opportunities for political manipulation, bureaucracy, or worse. It would likely exacerbate volatility in energy prices, as permit prices soar in booms and collapse in busts. The European emissions trading system has been a dismal failure. A direct, transparent carbon tax would be far better.

Moreover, the president's energy proposals radically underestimate the time frame for bringing alternatives plausibly to scale. His own Energy Department estimates we will need a lot more oil and gas in the meantime, necessitating $11 trillion in capital investment to avoid permanently higher prices.

The president proposes a large defense drawdown to pay for exploding nondefense outlays -- similar to those of Presidents Carter and Clinton -- which were widely perceived by both Republicans and Democrats as having gone too far, leaving large holes in our military. We paid a high price for those mistakes and should not repeat them.

The president's proposed limitations on the value of itemized deductions for those in the top tax brackets would clobber itemized charitable contributions, half of which are by those at the top. This change effectively increases the cost to the donor by roughly 20% (to just over 72 cents from 60 cents per dollar donated). Estimates of the responsiveness of giving to after-tax prices range from a bit above to a little below proportionate, so reductions in giving will be large and permanent, even after the recession ends and the financial markets rebound.

A similar effect will exacerbate tax flight from states like California and New York, which rely on steeply progressive income taxes collecting a large fraction of revenue from a small fraction of their residents. This attack on decentralization permeates the budget -- e.g., killing the private fee-for-service Medicare option -- and will curtail the experimentation, innovation and competition that provide a road map to greater effectiveness.

The pervasive government subsidies and mandates -- in health, pharmaceuticals, energy and the like -- will do a poor job of picking winners and losers (ask the Japanese or Europeans) and will be difficult to unwind as recipients lobby for continuation and expansion. Expanding the scale and scope of government largess means that more and more of our best entrepreneurs, managers and workers will spend their time and talent chasing handouts subject to bureaucratic diktats, not the marketplace needs and wants of consumers.

Our competitors have lower corporate tax rates and tax only domestic earnings, yet the budget seeks to restrict deferral of taxes on overseas earnings, arguing it drives jobs overseas. But the academic research (most notably by Mihir Desai, C. Fritz Foley and James Hines Jr.) reveals the opposite: American firms' overseas investments strengthen their domestic operations and employee compensation.

New and expanded refundable tax credits would raise the fraction of taxpayers paying no income taxes to almost 50% from 38%. This is potentially the most pernicious feature of the president's budget, because it would cement a permanent voting majority with no stake in controlling the cost of general government.

From the poorly designed stimulus bill and vague new financial rescue plan, to the enormous expansion of government spending, taxes and debt somehow permanently strengthening economic growth, the assumptions underlying the president's economic program seem bereft of rigorous analysis and a careful reading of history.

Unfortunately, our history suggests new government programs, however noble the intent, more often wind up delivering less, more slowly, at far higher cost than projected, with potentially damaging unintended consequences. The most recent case, of course, was the government's meddling in the housing market to bring home ownership to low-income families, which became a prime cause of the current economic and financial disaster.

On the growth effects of a large expansion of government, the European social welfare states present a window on our potential future: standards of living permanently 30% lower than ours. Rounding off perceived rough edges of our economic system may well be called for, but a major, perhaps irreversible, step toward a European-style social welfare state with its concomitant long-run economic stagnation is not.

Sunday, March 1, 2009

Why is it that liberals cannot understand, no matter how clear the evidence?

Why is it that liberals cannot understand, no matter how clear the evidence, that you can't spend your way to prosperity?

Why is it that liberals cannot understand, no matter how clear the evidence, that there's no such thing as free?

Why is it that liberals cannot understand, no matter how clear the evidence, that the laws of economics are immutable?

Why is it that liberals cannot understand, no matter how clear the evidence, that government can never "work better"?

Why is it that liberals cannot understand, no matter how clear the evidence, that government cannot solve your problems?

Why is it that liberals cannot understand, no matter how clear the evidence, that government cannot guarantee success?

Why is it that liberals cannot understand, no matter how clear the evidence, that government cannot provide equal results but only equal opportunity?

Why is it that liberals cannot understand, no matter how clear the evidence, that the only way to real prosperity is through the individual and that unshackling human innovation and creativity is the greatest engine for freedom, liberty and economic prosperity?

Why is it that liberals cannot understand, no matter how clear the evidence, whether it be from reading The Constitution, The Declaration of Independence or The Federalist Papers, that their view and vision of America is the complete antithesis to the views and vision of our founding fathers?

Why is it that liberals cannot understand, no matter how clear the evidence, that SOCIALISM HAS NEVER AND WILL NEVER WORK????

Why is it that liberals cannot understand, no matter how clear the evidence, that deregulation did not cause our current financial crisis but that its real cause was actually overregulation in the form of social engineering and too much government intervention in our lives?

Why is it that liberals cannot understand, no matter how clear the evidence, that socialized medicine only leads to worse care -- by deterring talented people from entering the medical field, government rationing -- by creating a supply shortage in available medicine and care-givers, and unsustainability -- due to the declining economic growth caused by the tremendous tax burden of having to pay for such a system?

Why is it that liberals cannot understand, no matter how clear the evidence, that showing weakness to our enemies only invites attack?

Why is it that liberals cannot understand, no matter how clear the evidence, that raising taxes leads inevitably leads to less economic output and growth and ultimately less revenue to the government and that lowering taxes will always lead to greater economic vitality and strength and ultimately more revenue to the government?

Why is it that liberals cannot understand, no matter how clear the evidence, that Barack Obama's plans are not new or visionary, but are rather the same failed policies that have caused such horror, suffering and pain so many times throughout history?

Why is it that liberals cannot understand, no matter how clear the evidence, that Barack Obama's economic prescriptions can and will only lead to stagflation, a tremendous decrease in our standard of living, misery and ultimately worldwide catastrophe?

Why is it that liberals cannot understand, no matter how clear the evidence? Or is it that they just simply refuse to understand?

Here are some quotes from the last Democrat to actually get it (if only Obama really cared about actually saving our economy)...

"Our tax system still siphons out of the private economy too large a share of personal and business purchasing power and reduces the incentive for risk, investment and effort – thereby aborting our recoveries and stifling our national growth rate." -- John F. Kennedy, Jan. 24, 1963

"A tax cut means higher family income and higher business profits and a balanced federal budget. Every taxpayer and his family will have more money left over after taxes for a new car, a new home, new conveniences, education and investment. Every businessman can keep a higher percentage of his profits in his cash register or put it to work expanding or improving his business, and as the national income grows, the federal government will ultimately end up with more revenues." -- John F. Kennedy, Sept. 18, 1963

"It is a paradoxical truth that tax rates are too high and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now ... Cutting taxes now is not to incur a budget deficit, but to achieve the more prosperous, expanding economy which can bring a budget surplus." -- John F. Kennedy, Nov. 20, 1962

"Lower rates of taxation will stimulate economic activity and so raise the levels of personal and corporate income as to yield within a few years an increased – not a reduced – flow of revenues to the federal government."-- John F. Kennedy, Jan. 17, 1963

"It is no contradiction – the most important single thing we can do to stimulate investment in today's economy is to raise consumption by major reduction of individual income tax rates." -- John F. Kennedy, Jan. 21, 1963

Some words of wisdom from the father of the Democratic party (apparently Obama and the Dems aren't too interested in these truths either)...

"The democracy will cease to exist when you take away from those who are willing to work and give to those who would not." -- Thomas Jefferson

"I am not a friend to a very energetic government. It is always oppressive." -- Thomas Jefferson

"Government big enough to supply everything you need is big enough to take everything you have ... The course of history shows that as a government grows, liberty decreases." -- Thomas Jefferson

How Many Ways is Obama a Marxist? Let me count the ways...

Well, it seems that with another day gone by in this disaster of an administration, Obama's Socialist agenda is creeping through. Unfortunately, the Obama drones still refuse to wake up to his and the Democrat's stealth power grab (or not so stealthy if one is paying attention).

So, let's look at what the left is trying to pass under the guise of "helping"...

1) Shifting the national census away from the Census Bureau which, by law, is supposed to be under the jurisdiction of the Department of Commerce into the hands of the White House Chief of Staff (Rahm Emanual). As usual, he did this by executive decision, circumventing the legislative process as a good tyrant generally does.

The census is extremely important and is actually the backbone of a free society. It exists to properly proportion representation in the Federal government by determining population shifts by state. There can be only one reason Obama has decided to arbitrarily place it under the ownership of change the proportioning of representation to favor the Democrats in an effort to assure perennial power.

None of it will be transparent and population numbers can easily be fudged. Look, the Democrats know that the Blue States are losing population to the Red States. So, they are quite simply going to play fast and loose with the numbers. It's quite the move, straight out of the Marxist playbook.

Score 1 for the Marxist takeover of America and 0 for freedom...

2) Hiding something called the "Federal Coordinating Council for Comparative Effectiveness Research" in the "stimulus" (taxpayer rape bill). Well, what is the "Federal Coordinating Council for Comparative Effectiveness Research" you ask? Well, as usual with the left they show 1 side of something to the public as being good while concealing the real pernicious plan from view. Basically, they want to put medical records online to try to reduce costs for the medical system. Now, that in itself is not a bad idea since it will help doctors when they try to administer treatment and it will reduce redundancy.

However, since the left's agenda is to control every aspect of American's lives, including healthcare, they, of course, do not stop there. That is the public reasoning for this "council". However, if you read further, you will see the real pernicious intent -- to ration medical care (as they do in Canada and England to name just 2).

This "council" will act to force doctors to make choices regarding care based on what the bureaucrats think is cost effective or not. They will also get to play G-D by deciding based on age who will get to receive experimental treatments and who will simply not qualify. This, of course, will impact the elderly and the infirmed more than anyone else. See, to the left, they want to "drive down costs" by limiting the use and development of what they deem experimental treatments. Here is a good article from Bloomberg news explaining this in further detail...

Well, with this, it's score 2 for the Marxist takeover of America...score 0 for freedom.

3) The expansion of the S-CHIP program. S-CHIP is the State Health Insurance Program created in 1997 by Bill Clinton. It mandates covering the supposed "uninsured". The foundation is obviously false. It is again another 2 faced plan. The side shown to the public seems noble -- but the real reason is far from it.

Basically, the expansion of S-CHIP forces coverage to children who already have private insurance. It expands it to cover families who make up to and over 100K per year. Now, why would the left want to do this?

Well, the answer is quite is to incrementally gain control over the healthcare industry to move the U.S. stealthily toward a single-payer socialist system. Now, if a family who is already paying for private insurance is now covered under S-CHIP, why pay for private insurance at all? Many will ditch their private insurance plans for "free" care (of course there is a difference between price and cost -- and the costs of this are enormous). The less well off in the program will pay increased taxes to cover the more well off, thereby nullifying any ambition they would have to move up the economic ladder.

See, in a socialist economy you have 2 classes -- the rich and the poor. There is no middle class. This is the goal of the left here in America. The goal is those that work and pay the taxes and those that feed off the government trough in a cycle of endless dependency ensuring perennial power of the elites. There is another provision in the program that is even more pernicious. See, in a real marketplace, if someone is more of a risk, their premium will go up. It's simple economics.

However, the provision in the S-CHIP expansion is that there will be no bias towards pre-existing conditions. This means that if 1 person is in the program and goes to the Dr. once every 3 years and another person is in the program and goes to the Dr. every other day and has an existing condition, they will both pay the same amount for coverage. This infusion of government into the private healthcare industry will crowd out the private insurance system and will therefore lead to less control over your own healthcare and more government control over your treatments and ultimately your livelyhood.

Score 3 for the Marxist takeover of America and 0 for freedom.

This is part 1 of this series. Part 2 will come soon...